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1. Moldova: The story behind the Magnitsky

* A legislative initiative to align Moldova to the Global Magnitsky Act was registered on Thursday, July 26, just hours before the closure of the latest legislative session of the Moldovan parliament.

The bill aims to prevent suspected individuals connected to large-scale money laundering, corruption, or human rights abuses from entering Moldova, access its banking system, or apply for its citizenship, and pledges to confiscate their assets if they can be traced to illicit activities.

Originating from a civil society advocacy action, led by IDIS, TI-Moldova, CPR and Watchdog, the initiative found support from 10 MPs, representing two parliamentary fractions (PLDM and PPEM).

“We hope that there is not a single parliamentary faction opposing the fight against corruption or prosecution of individuals involved in money-laundering in our parliament,” said Tudor Deliu, chair of the PLDM’s legislative group, when presenting the draft law to the media.

Since most of the financial scams involving offshore jurisdictions were shepherded from Russia, authors of the Magnitsky draft law claim they want to protect Moldova from the influence of organised international crime, in order to prevent the country from becoming an international hub for illicit money-laundering operations and a safe haven for groups and individuals seeking shelter from the authorities.

Credible international sources estimate that around 85 billion US dollars has been laundered from Russia over the last decade and that around 24 billion US dollars might have been washed through Moldova. Over 34 states have been affected by the Russian laundromat, according to data shared by the OCCCRP, but attempts to bring those responsible to justice have been hampered by the reluctance of Russian officials to cooperate, as well as by local proxies.

The story behind the Magnitsky bill dates back nearly a decade. In 2009, a Russian lawyer, Sergey Magnitsky, was imprisoned, tortured, and then killed in police custody in Moscow. His murder was a response to his investigation into a huge tax fraud scheme used by Russian dignitaries to steal and appropriate over 230 million US dollars in federal funds.

After his death, Bill Browder acted on behalf of his former employee and lobbied US Congress to punish complicit Kremlin officials involved in the killing of Magnitsky and pass a bill (in 2012) which specifically detailed a list of individual sanctions (such as suspending US visas and freezing of financial assets within the US banking system).

In 2015, Moldovan citizens discovered that they had been robbed of one billion US dollars. The embezzlement of over one-eighth of Moldova’s GDP generated a serious decline in the country’s wellbeing and increased instability in the financial system. With a 30 per cent currency devaluation in 2015, life became more expensive and visibly disconcerting for young educated Moldovans.

Around the same time, links were found between the ‘heist’ of the banks and the infamous Russian laundromat estimated at 24 billion euros, involving several judges and governmental officials, in complicity with networks in Russia. Captured by affluent oligarchs, state bodies stood and watched the epic banking fraud take place, unable or unwilling to investigate and prosecute the culprits.

Earlier this month, the EU suspended its macro-economic assistance to Moldova, warning that other type of assistance would be swiftly stopped if the government continues to trample all over its its democratic commitments.

Notwithstanding the European Parliament Resolution on Moldova, Democratic Party leaders accused the EU in tun of “playing into the hands of the opposition”; whose demands will remain unmet – return to the previous proportional election system from the current mixed system, validate the results of the Chisinau mayoral election and punish the politicised judges who invalidated them.

While civil society leaders appeal to EU for support, the ruling Democrats seem increasingly keen on exiting democracy, reflecting the views of their mighty financier, Vlad Plahotniuc, who seems keen to monopolise politics in Moldova and leave almost no room for opposition views.

Growing steadily into a position of ‘absolute power’ (factotum), the Democrats are willing to install a sort of ‘vertical of power’ regime that would enable them to reign as ‘uncrowned kings’, thus, essentially undermining the substance of European values and norms, the most important pillar of the EU Eastern Partnership. On July 26, the ruling coalition, led by the Democrats, voted a law “on voluntary declaration and fiscal stimulation,” a de facto amnesty on huge amounts of foreign capital on payment of a fee of three per cent.

Special provisions of the law would prevent the specialised investigation bodies from checking the ‘legalised’ assets. Largely, the bill is almost a tween to another draft law proposed on December 1, 2016 by the same authors on the so-called ‘capital amnesty’ that would release from liability any physical person and legal entity who illegally gained their property and assets in exchange for a two per cent tax to the state from the total value of the undeclared assets.

However, this time the draft was adopted at a light-speed, in two readings in the same legislative day, without prior consultation. The velocity of the law making in this special case raised serious suspicions about the scope of this draft.

As in 2016, prominent civil society leaders and opposition parties condemned in strong terms the law, seen as a brutal attempt to legalise the results of the banking frauds and create a large offshore zone in Moldova, instead of punishing the culprits of the banking frauds.

Earlier, the National Bank of Moldova confirmed it had received from the international Kroll and Steptoe and Johnson consortium all investigation documents, documenting that during 2012-14, three banks in Moldova provided loans worth 2.9 billion US dollars to the companies belonging to the Shor Group, which it had passed to the Anti-corruption Prosecutor’s Office. Nevertheless, the case remains open and the effective beneficiaries of the serious financial fraud are still at liberty

The publication is not an editorial. It reflects solely the point of view and argumentation of the author. The publication is presented in the presentation. Start in the previous issue. The original is available at: emerging-europe.com

3 comments

Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act of 2012 — Title I: Permanent Normal Trade Relations for the Russian Federation — (Sec. 102) Authorizes the President to: (1) determine that title IV (Jackson-Vanik Amendment) of the Trade Act of 1974 (denying nondiscriminatory treatment [normal trade relations treatment] to non-market countries that restrict freedom of emigration and other human rights) should no longer apply to the Russian Federation, and (2) extend permanent normal trade relations treatment to the products of the Russian Federation upon its accession to the World Trade Organization (WTO).

In the Magnitsky frauds, the money stolen from the Russian National Treasury at the beginning of 2008 disappeared in a proxy network. Two companies of this network from Moldova were Elenast-Com SRL and Bunicon-Impex SRL, registered in a apartment bloc and an abandoned office center respectively.

Sergey Magnitsky, a lawyer of Hermitage Capital Management, had alleged there had been a large-scale theft (230 million USD) from the Russian state sanctioned and carried out by Russian officials. He was arrested and eventually died in prison seven days before the expiration of the one-year term during which he could be legally held without trial.